How to trade forex – Support and Resistance

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Simply stated, support and resistance are respective price levels at which price stops going up or down. A price in any market is one at which bulls and bears have agreed upon fair value. If bulls think that the price is low, they will attempt to buy.

This, in turn, raises demand and prices rise. As prices rise, bulls become less aggressive in their actions and bears become more aggressive. At some point, bullish and bearish aggressiveness will balance and that price level become resistance.

The converse is true for support as the aggressiveness of the bears falls while the aggressiveness of the bull rises. When they balance, price stop falling and support is established.

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Notice that aggressiveness balances. Supply and demand are always in balance at any given price because a trade price was agreed upon.

Chart patterns are bound by support and resistance. Trendline are support and resistance lines on an angle.